19. In a period when U.S. equity prices are increasing and the U.S. dollar is depreciating, which of the
following investors in U.S. equities is most likely to earn the highest return in the investor’s local
currency?
A) Non-U.S. investor who reinvests dividends.
B) Non-U.S. investor who does not reinvest dividends.
C) U.S. investor who reinvests dividends.
Answer given is C.
Why not answer-B?
Dear Mr. Patel
Becoz U.S investor Doesn’t have any currency risk.
For Ex. In current scenario $ is something 82.75 and you as an Indian investor invests Rs. 82750 = 82750/82.75 = $ 1000 in a particular U.S security & earn 10% and ur fund value after 10 days say =$1100 and want to back his money but on that particular time $ depreciate say 80.25, so you will recv. $1100*80.25= Rs.88275
ur net gain = 88275/82750 = 1.06676 which mean 6.67%
Crux is that kamaya 10, currency ne gava diya sometning 3. so net in approx 6.67
Hope it clear!